Monday, November 5, 2007

Give, but verify

From Unintended Consequences:
This morning’s Marketplace from American Public Media included a story on using Wall Street know how to evaluate and raise money for charities. A problem is that prospective donors have trouble distinguishing “worthy” charities from those that squander resources or worse. So a couple of Wall Street types are developing SocialMarkets. The idea is to trade a security that pays off depending on how well the program ... succeeds in meeting its stated goals.
The prices of these contracts would tell us which charities are likely to succeed, in much the same way that the prices of political futures contracts tell us that Senator Clinton has a 71% chance of winnig the Democratic nomination for president.

1 comment:

  1. Hmm... I would LOVE to create a prediction market for the nonprofit sector but we're definitely not there yet. Hayek's formulation of a market as aggregating all available information is correct but if you look at the nonprofit sector there's no available information to aggregate. Without data points, prediction markets are useless. They end up being a popularity contest.